Bizarro Housing Bubble Spills Over Into "Overbid Madness", $10 Million "Flips" In 24 Hours

Tyler Durden's picture




 

While the housing bubble for anything but the ultra luxury segment has long since popped with $1.1 trillion of student loans playing a significant role in the burst, (as explained in "Stick A Fork In The "Housing Recovery"), as can be seen in the chart below which shows that the only increase in existing home sales from a year ago is that for the $500 and over price range (which accounts for only 10% of all actual transactions).... 

... when it comes to the luxury segment, things have moved beyond the simply bizarre and have entered outright surreal territory.

Case in point: San Francisco, where realtors have had to come up with a new term to explain what is happening when a house just sold for $600,000 above the $1.5 million asking price! The term: "overbid madness" and it explains well the buying frenzy that has engulfed the smallest portion of the housing market - that of the rarefied ultraluxury housing where the wealthy - almost exclusively offshore buyers - merely flip properties back and forth from each other without regard for price, comps or any other traditional valuation metrics. The underlying objective - parking illegal cash into the safety of the US housing market in which the NAR is a perfectly willing receptacle of laundered money.

CBS explains:

Shrouded in fog, and swimming in cash a two bedroom, modern home in the Glen Park neighborhood was just snapped up for $2.1 million.

 

“That’s really unbelievable,” said Kendra Mastain of San Francisco.

 

The sleek home on Bosworth sold for $600,000 over asking price. “I’m a RN, I make a decent living,” said Tammy Elder of San Francisco. “I don’t ever picture myself buying a house here.”

 

Arrian Binnings of Christie’s / Pacific Union told KPIX 5, “That wasn’t even our highest offer.”

 

Binnings said it’s supply and demand, with most homes for sale commanding 12 percent over asking.

 

“That is a red hot market,” he said.

And while the bubble for most areas across the US has long since burst, in San Francisco it is raging like never before:

Real estate agents said if new property stopped coming on the market, San Francisco would run out of homes for sale in just five weeks. There were eight offers on the home, but only one person can win. It has turn San Francisco’s real estate market into contestant’s row on The Price Is Right, making the losing bidders desperate

Ridiculous? Yes. Insane? Absolutely.

But San Francisco has nothing on the the insanity that has gripped the ultra luxury housing segment in New York, where within 24 hours, an overzealous seller tried to flip a $31 million three-bedroom condo at One57 purchased on May 6, to an even more overzealous buyer on May 7 for... $41 million - a $10 million price increase in one day!

From Bloomberg:

A three-bedroom condo in the building sold for a record $31 million in April to a mysterious buyer known as Escape From New York LLC. The sale was officially memorialized in public real estate records on Tuesday. Then, on Wednesday, the new buyer put the property back on the market for $41 million, a miraculous 32 percent increase in value.

 


 

This is a sign of what real estate writers often describe as “a frothy” market. The Real Deal, which uncovered the fast-appreciating home, describes it as a “4,483-square-foot, 62nd-floor apartment [featuring] four bathrooms and floor-to-ceiling windows.” It must be adorable. But could such comforts be worth $10 million more overnight? We won’t know until the aspiring investor-escapee completes the flip of No. 62A.

A $10 million flip in a day? Why not - and if the greater fool for whom money is no object appears, others will promptly follow:

If the entity known as Escape From New York gets its asking price, there will be at least one other satisfied party in the tower: the owner of a three-bedroom unit on two floors below. That unit sold for $30 million last month, too, in a transaction that inspired a bit of real-estate porn in the New York Times:

 

    “The apartment, No. 60A, has four-and-a-half marble baths and the ultimate view magnet, 60 feet of park frontage in the living/dining/entertaining area. The master suite has his-and-hers baths and bird’s-eye views of the city and the Hudson River. The custom eat-in kitchen by Smallbone of Devizes has hand-painted white cabinetry (although buyers at One57 do have the option of choosing a Macassar ebony color scheme).”

 

Throw in the optional room service—wouldn’t you expect it at this price?—and such opulence suddenly seems like a bargain at only $30 million.

How much longer can this undisputed housing bubble last? Going back to San Francisco, here is what a Christie's real estate agent thinks:

Binnings believes there is an end to the real estate crazy train. “The type of growth we’re seeing right now is not sustainable year over year, I expect to see these types of prices tame down a little bit,” he said.

Then again, neither Binnings, noe anyone else, has seen what happens when central banks inject $10 trillion into a global economy with very finite real assets.

Expect the sheer idiocy created by Bernanke, the Charimanwoman et al to last at least a little bit longer: because why rush the epic amusement associated with the biggest bubble burst ever seen in human history?

If anything, the more terminal the destruction in its wake, the more certain that the Keynesian idiocy that has gripped the "very serious" people of the world with its final deathly grip, dies the slow and miserable death it so deserves.

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Sat, 05/10/2014 - 17:06 | 4746769 TeamDepends
TeamDepends's picture

Hope and Change.

Sat, 05/10/2014 - 17:11 | 4746774 texas sandman
texas sandman's picture

Can you say "full retard"?

Sat, 05/10/2014 - 17:15 | 4746788 I am more equal...
I am more equal than others's picture

 

 

Fool and his money are soon parted.

 

Sat, 05/10/2014 - 17:53 | 4746827 cifo
cifo's picture

A fool with 31 million is definitelly smarter than me.

Sat, 05/10/2014 - 18:14 | 4746859 YBNguy
YBNguy's picture

Its called money laundering

Sat, 05/10/2014 - 19:06 | 4746906 redpill
redpill's picture

Let's not confuse normal housing with the Fed-stoked beneficiaries.  Normal housing has enough issues, but this is not a sign of housing trends, but a sign of money flows.

Sat, 05/10/2014 - 19:25 | 4746934 Arius
Arius's picture

Armstrong wrote a few weeks, of a lot of rich folks trying to get off the grid ... his answer real estate, of course he through in his old coins as well, but very difficult to get those, otherwise, where can you spent it????

there are quite a lot of folks trying to cash in their chips (foreign and domestic "terrorist " that is).... thats what is really going on...

Sat, 05/10/2014 - 19:37 | 4746945 Caviar Emptor
Caviar Emptor's picture

This too was predicted. One of the key underpinnings of Biflation: after decades of crazy money printing to purchase materials, goods and services from overseas (to fund the giant, chronic trade deficit), the money is coming home to roost. Even with a collapsing economy, inflation lives when dollar-trillionaires come to lavishly spend their booty. To them NY can be had for a song

Sat, 05/10/2014 - 20:24 | 4747022 Handful of Dust
Handful of Dust's picture

Can they pay for it in Yuan, or do they have to convert it into dollars first?

Sat, 05/10/2014 - 20:38 | 4747041 new game
new game's picture

not surprised when the fed creates 4 trillion out of thin air and it consolidated in .001 percent's hands.

thanks you cock sucking mother fuckers(the fed and reserves banks and gs and jp)

Sat, 05/10/2014 - 21:59 | 4747254 James_Cole
James_Cole's picture

 

Throw in the optional room service—wouldn’t you expect it at this price?—and such opulence suddenly seems like a bargain at only $30 million

 

So, how much extra is the room service? I mean, this is a hellofa bargain at a measly 30m but I don't want to get fleeced on room service.. they always try to squeeze you on that shit. Not to mention the taker-class delivering my food always expects tips too, bunch of assholes!

 

 

Sat, 05/10/2014 - 22:08 | 4747297 palmereldritch
palmereldritch's picture

Here's a handy video to explain the phenomenon*

https://www.youtube.com/watch?v=zPC3HmOcyY8

* Federal Reserve Approved

Remember to wear your gloves everyone!!

Mon, 05/12/2014 - 06:20 | 4750143 Scarlett
Scarlett's picture

Nice vid.

 

Those guys are Fed Economists, right?

Sat, 05/10/2014 - 21:27 | 4747180 PT
PT's picture

YBNguy:

My first thought was someone is "burying all their money in the ground", and when they go to "dig it up" it won't be there.  My second thought was money laundering, but you beat me to it.

"How did you suddenly get that extra X mill in your pocket?  You must have done something illegal."

"No.  I won it at the races." 
"No.  I just bought a house and sold it again, and bugger me, the price went up by X mill!"

At this stage, the credibility of both "excuses" is about the same.

I wonder which one is easier to set up?
I wonder how hard would it be to track down details and connections between buyers and sellers and determine if something looks fishy.

Sat, 05/10/2014 - 21:46 | 4747240 PT
PT's picture

But ...

But it all doesn't matter becoz some enterprizing entrepreneurial entrpreneur will see those big profits and think to himself, "I wanna piece of zat", and then he will build more houses and the increased supply will bring back affordability to all!!!

(Yes, I did notice the stats for the poor end of town.  That tends to happen when the poor still can't afford the rent or the property taxes, or when the house is hundreds of miles away from the closest job.  There's a suggestion for some further areas of study, for anyone who is interested / can be bothered.)

Sat, 05/10/2014 - 22:07 | 4747299 Kirk2NCC1701
Kirk2NCC1701's picture

Not so much money laundering (but that too) as Financial Doomsday Shelters for Billionaire Preppers, who need to put all the Easy Money (Illicit gains + QE1+QE2+QE3...) somewhere into real assets, before the Big Reset.

Note also that the Big4 CBs (Fed, ECB, BOJ, BOE) aka "Club Fed" aka "Fed & Friends" are the same ones that comprise IMF's "SDR".

When they set off the Mother Of All Monetary Kabooms, they want to make sure that their fiat "SDR" (and the Debt Obligations behind them) gets adopted by the rest of the planet and that those who don't accept it, are locked out in the cold.  That's why the BRICS need to move soon.  Very, VERY soon, or they'll get ambushed by the Big4/SDR.

If I were the BRICS, I'd have a multilateral or several bilateral agreements in place for direct currency swaps... THIS year, and be ready to pull the trigger at a moment's notice.  Don't let the BS in Syria, Ukraine, Venezuela or Argentina blind or distract you.

 

Sat, 05/10/2014 - 23:16 | 4747450 Jam Akin
Jam Akin's picture

The BRICS and others are preparing at speed.  Just can't pull out of the station until everyone is on board.

Sun, 05/11/2014 - 03:02 | 4747634 scaleindependent
scaleindependent's picture

Kirk
Very interesting

Would this kaboom be deflationary or inflationary? I assume it will be deflationary as it is the best way to kill commodity exporting BRICS. Then after the collapse they will re inflate to buy the BRICS for cheap. Will The west destroy russia with a deflationary short acting blitz? This way they will also get the last remaining assets of the US middle class.

TIA

Sun, 05/11/2014 - 10:41 | 4747978 layman_please
layman_please's picture

it's a mistake to think china and russia and other brics are not behind sdr implementation. they just want more say!

“We support the reform and improvement of the international monetary system, with a broad based international reserve currency system providing stability and certainty,” the five regimes said in the declaration, calling for Third World dictators to have a greater say in the IMF and the emerging global monetary regime. “We welcome the discussion about the role of the [IMF’s] SDR in the existing international monetary system including the composition of SDR’s basket of currencies."

http://www.thenewamerican.com/economy/item/17817-obama-exploiting-ukrain...

http://www.slate.com/articles/news_and_politics/explainer/2009/04/world_...

http://www.euromoney.com/Article/2172502/SDR-vs-the-Dollar-China-and-Rus...

 

Sat, 05/10/2014 - 23:22 | 4747461 zstard
zstard's picture

More well connected prolly. Not necessarily smarter.

Sat, 05/10/2014 - 23:51 | 4747498 Debugas
Debugas's picture

being rich has very little to do with being smart but more with lack of morality

Sun, 05/11/2014 - 08:12 | 4747781 Oh regional Indian
Oh regional Indian's picture

Beyond a certain point, that is true.

I have never met a truly moral very rich person.

Some wives who married in yes, but not the men.

Assholes below a pico-meter thin veneer of niceness.

ori

Sun, 05/11/2014 - 20:13 | 4749331 Crisismode
Crisismode's picture

 

 

"It is easier for a Camel to go through the eye of a needle,

 . . . than for a rich man to get into Heaven."

 

Jesus Christ

 

Sun, 05/11/2014 - 08:28 | 4747797 crazzziecanuck
crazzziecanuck's picture

Shouldn't take be a fool and his money is soon printed?

Sat, 05/10/2014 - 21:43 | 4747232 stocktivity
stocktivity's picture

I think bizarro is the new normal...It's all bullshit!!!

Sat, 05/10/2014 - 17:12 | 4746781 So What
So What's picture

If you dig deep enough, it won't be surprising at all. It's simply the right hand and left hand of the same money launderer from China; right hand selling to left hand with a profit whereby the left hand can now have 10 mil cash, minus tax, a simple laundry cost, with which it can legally do other things in the USA. simple. don't buy into the bs.

Sat, 05/10/2014 - 20:36 | 4747036 willwork4food
willwork4food's picture

Quite true. Which could start another boom/bust cycle all over again.

Sun, 05/11/2014 - 16:21 | 4748717 daveO
daveO's picture

Weren't the Japs were doing it in 1990? Same story, different actors.

Sat, 05/10/2014 - 17:16 | 4746790 nmewn
nmewn's picture

#Hopen4PocketChange

Sat, 05/10/2014 - 18:06 | 4746844 mt paul
mt paul's picture

Hopen

Pocketchange

 

good stripper name

 

Sat, 05/10/2014 - 18:22 | 4746866 nmewn
nmewn's picture

lol...yeah, "Lets give it up for sexy lady HashTag!" probably wouldn't work ;-)

Sat, 05/10/2014 - 17:50 | 4746825 chinoslims
chinoslims's picture

Yeah, Hope and Change for the 0.01%.  Doom and gloom for the 99%.

Sat, 05/10/2014 - 19:45 | 4746955 slingshot
slingshot's picture

Plans call for "83 museum-quality residences," a rooftop helipad and a high-security vault to hold buyers' valuables. Prices on websites marketing the project range from $4.9 million to $45 million.

Read More At Investor's Business Daily: http://news.investors.com/business-inside-real-estate/050814-700162-miami-condo-market-new-boom-cycle.htm#ixzz31MKe322n 

 

Read more here: http://www.miamiherald.com/projects/2014/zipcode/stories/overview/#story...

http://www.miamiherald.com/projects/2014/zipcode/stories/overview/

 

Sat, 05/10/2014 - 20:10 | 4747003 cifo
cifo's picture

Isn't Miami supposed to be under water (literally) in a few years? Isn't this common knowledge yet?

 

Sat, 05/10/2014 - 21:47 | 4747243 weburke
weburke's picture

nope, quite the contrary, water is turning into ice. 

Sun, 05/11/2014 - 11:33 | 4748095 Vooter
Vooter's picture

Jesus, we can only hope. I'll certainly buy tickets for that one. As it is, I can only sit and hope for a Hurricane Andrew redux--only this time, it'll hopefully bounce back and forth across the entire state like a giant orbital sander...

Sat, 05/10/2014 - 17:14 | 4746780 deflator
deflator's picture

I wonder what happened to all of the, "New Yorkers" that have been priced out of NYC property markets.

 

 In the early eighties it was said that there were more Puerto Ricans in NYC than in Puerto Rico.

Sat, 05/10/2014 - 17:15 | 4746787 knukles
knukles's picture

Aw, they're still in rent controlled apartments.

Sat, 05/10/2014 - 17:26 | 4746804 nmewn
nmewn's picture

Now see, right there.

What people don't understand is oligarch types don't clean their own houses, they don't wash their own cars, they don't cook their own meals etc.

There has to be voorkers to do zeese things, the staff as it were. So put em out there in "their quarters"...don't even want them on the property.

Look how well government treats the slaves, why, whatever would they do without it?

DAMMIT!!!

Sat, 05/10/2014 - 18:08 | 4746851 Charles Wilson
Charles Wilson's picture

Freder:  "Father...Where are the people who once built Metropolis?"

Friedersen: "Where they belong."

Freder: "Where they belong?...In the Underground?"

Friedersen: "Yes..."

 

Metropolis, 1927

Sat, 05/10/2014 - 18:29 | 4746874 nmewn
nmewn's picture

Someday my friend, someday...I'm hoping to be around to see it.

Or at least start it ;-)

Sat, 05/10/2014 - 21:56 | 4746895 Charles Wilson
Charles Wilson's picture

The Kino Restoration from 2010 is THE version to get.

There is a YouTube version for inspection with German Intertitles but please consider buying the DVD in support of the Restoration.

 

This is one of the greatest movies ever made, even if you discount the Naivete at certain points.  The scene that plays out with the elder Fredersen just before the quotes I gave is as fine an introduction to Kantian Sensibilities as I have ever seen, with the character "Josephat" playing the Categories of the Understanding and the copyists playing the parts of "Linguistic Memory".

 

The movie is staggering in its accomplishments.   After it was cut to pieces by the Hollywood types and others, including the National Socialists who tried to destroy all copies of it, Lang was asked about it.

"Why are you asking about a movie that doesn't exist?"

 

It survives and we are better for it.

 

CW

Sat, 05/10/2014 - 17:17 | 4746791 khakuda
khakuda's picture

They are living with their parents back in the suburbs, sleeping four to a room , in rent controlled apartments or filling out graduate school applications.

Sat, 05/10/2014 - 17:15 | 4746786 khakuda
khakuda's picture

Walking through the streets of New York City last night, I walked past a real estate agent with listings on the window. There seem to be plenty of one bedroom apartment selling for 1.3 to $1.6 million. I remember when I started working in the city 20 years ago the very same apartments were $200,000 tops.

But, there is no inflation.

Sat, 05/10/2014 - 19:17 | 4746924 stopthejunk1
stopthejunk1's picture

Depends on the neighborhood. Gentrification will do that. NYC in general has become a much better place to live than 20 years ago, and that drives up the price, regardless of whether there is any inflation.

In Detroit on the other hand, real estate prices have plummeted.

Sat, 05/10/2014 - 22:03 | 4747291 pies_lancuchowy
pies_lancuchowy's picture

you, sir, are extremely biased.

There is no racism in Detroit. You cannot measure quality of life just by prices (high prices, to make things even stranger!)

Sat, 05/10/2014 - 17:19 | 4746794 optimator
optimator's picture

The 1% seemed to think its time to convert paper to something they can touch, McMansions, collector cars, coins, land, anything that isn't paper or promise of paper.

Sun, 05/11/2014 - 16:25 | 4748724 daveO
daveO's picture

The Chinese 1% escaping a sinking ship.

Sat, 05/10/2014 - 17:22 | 4746799 TheFreeLance
TheFreeLance's picture

See, why would this EVER stop? What pulls the rug out? 

Sat, 05/10/2014 - 17:24 | 4746800 Kasperfx
Kasperfx's picture

these are nothing but straw buyers and sellers. their all bogus set up amnd pumped by the realtords  to keep the american dream/myth alive. 

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